Critical Factors for Obtaining Venture Funding

Sometimes there is nothing more powerful than the passion and vision of an entrepreneur. But sometimes passion and vision are just not enough. It helps to understand the criteria that venture capital firms use to decide which companies to fund.

Some venture capital firms and corporate investors have very narrow criteria—specific technologies at specific stages in specific regions of the country. Others have broader criteria and invest across many technology sectors and geographic locations.

But all investors look for certain critical components in an early-stage company. Below is a brief summary of these critical criteria. If you meet these criteria, you may be able to continue to the next step in the venture financing process. If you don’t, you are likely to receive a polite note passing on your opportunity.

Comments & Advice:

You say, “Brilliant new companies create big markets, not the other way around.” Clearly the case with many iconic startups including Nvidia. Jen-Hsun Huang says that at the start all the market research reports put the market size at “approximately zero, a non-market.”

At the same time you say, “If the idea of developing credible financial projections makes you wince or wail, or if you think it’s a meaningless exercise, you are not an entrepreneur and you shouldn’t ask investors for money.” How can you come up with credible predictions when the market does not exist yet? How people adopt your technology is clearly much based on psychology. How do you put a to-be-converted customer’s psychology into a quantitative formula?